UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



Mark one:

xQUARTERLY
REPORT UNDER SECTION 13 OR 15(d)

OF THE SECURITIES EXCHANGE ACT OF 1934



For Quarter Ended March 31, 2014



OR



oTRANSITION
REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE

SECURITIES EXCHANGE ACT OF 1934.



For the transition period from to _______



Commission File Number 000-32695



Amaru, Inc.

(Exact name of registrant as specified in
its charter.)



|Nevada                   | 88-0490089                       
|------------------------ | ---------------------------------
|(State of Incorporation) | (IRS Employer Identification No.)



62 Cecil Street, #06-00 TPI Building,
Singapore 049710

(Address of principal executive offices)
(Zip Code)



Registrant's telephone number, including
area code (65) 6332 9287



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days.  YesxNoo



Indicate by check mark whether the registrant is a large accelerated
filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of "large accelerated
filer," "accelerated filer" and "smaller reporting company" in Rule 12b-2 of the Exchange Act.



|Large accelerated reporting  filero   | Accelerated filero
|------------------------------------- | ------------------
|Non-accelerated filero                | Smaller companyx  
|(Do not check if a smaller reporting) |                   



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act. YesoNox



Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.



|Common Stock $0.001 par value | 202,911,303 shares             
|----------------------------- | -------------------------------
|(Class)                       | (Outstanding at April 30, 2014)













AMARU, INC. AND SUBSIDIARIES

Quarterly Report on Form 10-Q for the Period
Ended March 31, 2014

Table of Contents





|                                                                                               | PAGE       
|---------------------------------------------------------------------------------------------- | -----------
|PART I:  FINANCIAL INFORMATION                                                                 | F-1        
|                                                                                               |            
|ITEM 1:  CONSOLIDATED FINANCIAL STATEMENTS                                                     | F-1        
|Consolidated Balance Sheets                                                                    | F-1        
|Consolidated Statements of Operations                                                          | F-3        
|Consolidated Statement of Stockholders’ Deficit                                                | F-5        
|Consolidated Statements of Cash Flows                                                          | F-6        
|Notes to Consolidated Financial Statements                                                     | F-7 to F-24
|                                                                                               |            
|ITEM 2:  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS | 1          
|                                                                                               |            
|ITEM 3:  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK                            | 5          
|                                                                                               |            
|ITEM 4:  CONTROLS AND PROCEDURES                                                               | 7          
|                                                                                               |            
|                                                                                               |            
|PART II:  OTHER INFORMATION                                                                    | 9          
|                                                                                               |            
|ITEM 1:  LEGAL PROCEEDINGS                                                                     | 9          
|ITEM 1A: RISK FACTORS                                                                          | 9          
|ITEM 2:  UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS                           | 13         
|ITEM 3:  DEFAULTS UPON SENIOR SECURITIES                                                       | 13         
|ITEM 4:  MINE SAFETY DISCLOSURES                                                               | 13         
|ITEM 5:  OTHER INFORMATION                                                                     | 13         
|ITEM 6:  EXHIBITS                                                                              | 14         
|                                                                                               |            
|SIGNATURES                                                                                     | 15         





i





PART I. FINANCIAL INFORMATION

Item 1. Financial Statements



AMARU, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS (IN U.S. $)

MARCH 31, 2014 AND DECEMBER 31, 2013





|ASSETS                                                                                                               |  |   | March 31,2014 |  |  |   | December
    31,2013 | 
|-------------------------------------------------------------------------------------------------------------------- |  | - | ------------- |  |  | - | -------------------- | 
|                                                                                                                     |  |   | (Unaudited)   |  |  |   |                      | 
|Current assets                                                                                                       |  |   |               |  |  |   |                      | 
|Cash                                                                                                                 |  | $ | 77,992        |  |  | $ | 33,338               | 
|Accounts receivable, net of allowance of $247,786 and $247,590 at March 31, 2014 and December 31, 2013, respectively |  |   | 4,544         |  |  |   | 18,781               | 
|Other current assets                                                                                                 |  |   | 195,546       |  |  |   | 183,666              | 
|                                                                                                                     |  |   |               |  |  |   |                      | 
|Total current assets                                                                                                 |  |   | 278,082       |  |  |   | 235,785              | 
|                                                                                                                     |  |   |               |  |  |   |                      | 
|Non-current assets                                                                                                   |  |   |               |  |  |   |                      | 
|Property, plant and equipment, net                                                                                   |  |   | 2,059         |  |  |   | 2,938                | 
|                                                                                                                     |  |   |               |  |  |   |                      | 
|Total non-current assets                                                                                             |  |   | 2,059         |  |  |   | 2,938                | 
|                                                                                                                     |  |   |               |  |  |   |                      | 
|TOTAL ASSETS                                                                                                         |  | $ | 280,141       |  |  | $ | 238,723              | 



See accompanying notes to consolidated financial statements.





F-1







AMARU, INC. AND SUBSIDIARIES



CONSOLIDATED BALANCE SHEETS (IN U.S. $)

MARCH 31, 2014 AND DECEMBER 31, 2013





|LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                        |  | March 31,  2014 |             |   | December 31,  2013 |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------- | ----------- | - | ------------------ | -
|                                                                                                                                                                             |  | (Unaudited)     |             |   |                    |  
|Current liabilities                                                                                                                                                          |  |                 |             |   |                    |  
|Accounts payable and accrued expenses                                                                                                                                        |  | $               | 1,498,600   |   |                    | $
|Advances from related parties                                                                                                                                                |  |                 | 300,403     |   |                    |  
|Convertible term loan                                                                                                                                                        |  |                 | 1,499,750   |   |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|Total current liabilities                                                                                                                                                    |  |                 | 3,298,753   |   |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|Total liabilities                                                                                                                                                            |  |                 | 3,298,753   |   |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|Stockholders’ deficit                                                                                                                                                        |  |                 |             |   |                    |  
|Preferred stock (par value $0.001) 25,000,000 shares authorized;12,887,478 and 9,247,478 shares issued and outstanding at March 31, 2014 and December 31, 2013, respectively |  |                 | 12,887      |   |                    |  
|Common stock (par value $0.001) 400,000,000 shares authorized; 194,656,710 shares issued and outstanding at March 31, 2014 and December 31, 2013                             |  |                 | 194,657     |   |                    |  
|Additional paid-in capital                                                                                                                                                   |  |                 | 43,427,369  |   |                    |  
|Accumulated deficit                                                                                                                                                          |  |                 | (42,937,306 | ) |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|Total Amaru Inc.’s stockholders’ equity                                                                                                                                      |  |                 | 697,607     |   |                    |  
|Non-controlling interests                                                                                                                                                    |  |                 | (3,716,219  | ) |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|Total stockholders’ deficit                                                                                                                                                  |  |                 | (3,018,612  | ) |                    |  
|                                                                                                                                                                             |  |                 |             |   |                    |  
|TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                  |  | $               | 280,141     |   |                    | $



See accompanying notes to consolidated financial statements.



F-2





amaru, Inc. and subsidiaries



CONSOLIDATED STATEMENTS OF OPERATIONS
(IN U.S. $)

FOR
THE THREE MONTHS ENDED MARCH 31, 2014 and 2013 (Unaudited)



|                                                        |  | Three Months Ended  March 31, |         
|------------------------------------------------------- |  | ----------------------------- | --------
|                                                        |  | 2014                          |         
|                                                        |  |                               |         
|Revenues                                                |  | $                             | 7,801   
|Cost of services                                        |  |                               | (32,772 
|                                                        |  |                               |         
|Gross loss                                              |  |                               | (24,971 
|                                                        |  |                               |         
|Operating expenses                                      |  |                               |         
|Distribution costs                                      |  |                               | 14,519  
|Bad debts                                               |  |                               | –       
|Administrative expenses                                 |  |                               | 176,176 
|                                                        |  |                               |         
|Total expenses                                          |  |                               | 190,695 
|                                                        |  |                               |         
|Loss from operations                                    |  |                               | (215,666
|                                                        |  |                               |         
|Other income (expense)                                  |  |                               |         
|Interest expenses                                       |  |                               | (24,022 
|Lossfrom saleof securities                              |  |                               | –       
|Net change in fair value of securities held for trading |  |                               | –       
|Other                                                   |  |                               | 25,860  
|                                                        |  |                               |         
|Loss before income taxes                                |  |                               | (213,828
|Provision for (benefit from) income taxes               |  |                               | –       
|                                                        |  |                               |         
|Net loss before non-controlling interests               |  |                               | (213,828
|Non-controlling interests                               |  |                               | (36,386 
|                                                        |  |                               |         
|Net loss                                                |  | $                             | (177,442



See accompanying notes to consolidated financial statements.



F-3







amaru, Inc. and subsidiaries



CONSOLIDATED STATEMENTS OF OPERATIONS
(IN U.S. $)

FOR
THE THREE MONTHS ENDED MARCH 31, 2014 and 2013 (Unaudited)



|                                                        |  | Three Months Ended  March 31, |            
|------------------------------------------------------- |  | ----------------------------- | -----------
|                                                        |  | 2014                          |            
|                                                        |  |                               |            
|Loss per share, basic                                   |  |                               | (0.00      
|Loss per share, diluted                                 |  |                               | (0.00      
|                                                        |  |                               |            
|Weighted average shares outstanding , basic and diluted |  |                               | 205,679,744























See accompanying notes to consolidated financial statements.







F-4





AMARU, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (IN U.S.
$)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 (UNAUDITED)





|                                  |  | Preferred stock  |            |  | Common stock       |   |        | Additional        |  |  |                    | 
|--------------------------------- |  | ---------------- | ---------- |  | ------------------ | - | ------ | ----------------- |  |  | ------------------ | 
|                                  |  | Number of shares |            |  | Par value ($0.001) |   |        | Number of  shares |  |  | Par value ($0.001) | 
|                                  |  |                  |            |  |                    |   |        |                   |  |  |                    | 
|Balance at December 31, 2013      |  |                  | 9,247,478  |  |                    | $ | 9,247  |                   |  |  | 194,656,710        | 
|Subscribed preferred stock issued |  |                  | 3,640,000  |  |                    |   | 3,640  |                   |  |  | –                  | 
|Net loss                          |  |                  | –          |  |                    |   | –      |                   |  |  | –                  | 
|Balance at March 31, 2014         |  |                  | 12,887,478 |  |                    | $ | 12,887 |                   |  |  | 194,656,710        | 









See accompanying notes to consolidated financial statements.



F-5





AMARU, INC. AND SUBSIDIARIES



CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT (IN U.S.
$)

FOR THE THREE MONTHS ENDED MARCH 31, 2014 (UNAUDITED)





|                                  |  | Minority interest |            |   | Total shareholders’ equity |  
|--------------------------------- |  | ----------------- | ---------- | - | -------------------------- | -
|                                  |  |                   |            |   |                            |  
|Balance at December 31, 2013      |  | $                 | (3,679,833 | ) |                            | $
|Subscribed preferred stock issued |  |                   | –          |   |                            |  
|Net loss                          |  |                   | (36,386    | ) |                            |  
|Balance at March 31, 2014         |  | $                 | (3,716,219 | ) |                            | $







See accompanying notes to consolidated financial statements.



F-6





Amaru, Inc. and subsidiaries



CONSOLIDATED STATEMENT OF CASH FLOWS
(IN U.S. $)

FOR
THE three months ENDED march 31, 2014 AND
2013 (unaudited)



|                                                                                         |  | Three Months Ended  March 31 |         
|---------------------------------------------------------------------------------------- |  | ---------------------------- | --------
|                                                                                         |  | 2014                         |         
|Cash flows from operating activities                                                     |  |                              |         
|Net loss                                                                                 |  | $                            | (213,828
|Adjustment to reconcile net loss to net cash provided by (used in) operating activities: |  |                              |         
|Depreciation                                                                             |  |                              | 879     
|Net change in fair value of securities held for trading                                  |  |                              | –       
|Interest on convertible term loan                                                        |  |                              | 24,022  
|Loss from sales of securities                                                            |  |                              | –       
|Change in operating assets and liabilities                                               |  |                              |         
|Decrease in accounts receivable                                                          |  |                              | 14,237  
|(Increase) decrease in other current assets                                              |  |                              | (11,880 
|(Decrease) increase in accounts payable and accrued expenses                             |  |                              | (68,776 
|                                                                                         |  |                              |         
|Net cash (used in) provided by operating activities                                      |  |                              | (255,346
|                                                                                         |  |                              |         
|Cash flows from investing activities                                                     |  |                              |         
|Cash proceeds from sales of securities                                                   |  |                              | –       
|                                                                                         |  |                              |         
|Net cash provided by investing activities                                                |  |                              | –       
|                                                                                         |  |                              |         
|Cash flows from financing activities                                                     |  |                              |         
|Repayment of term loan                                                                   |  |                              | –       
|Issuance of preferred stock for cash                                                     |  |                              | 300,000 
|                                                                                         |  |                              |         
|Net cash provided by (used in) financing activities                                      |  |                              | 300,000 
|                                                                                         |  |                              |         
|Net increase in cash                                                                     |  |                              | 44,654  
|Cash and cash equivalents at beginning of period                                         |  |                              | 33,338  
|                                                                                         |  |                              |         
|Cash and cash equivalents at end of period                                               |  | $                            | 77,992  
|                                                                                         |  |                              |         
|Supplemental disclosure of cash flow information                                         |  |                              |         
|Cash paid for interest                                                                   |  | $                            | –       
|Cash paid for income taxes                                                               |  | $                            | –       



See accompanying notes to consolidated financial statements.

F-7





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





1. ORGANIZATION



Amaru, Inc. and Subsidiaries (the "Company")
hopes to develop the business of broadband entertainment-on-demand, streaming via computers, television sets, PDAs (personal digital
assistant) and the provision of broadband services. Its business includes channel and program sponsorship (advertising and branding);
online subscriptions, channel/portal development (digital programming services); content aggregation and syndication, broadband
consulting services, broadband hosting and streaming services and e-commerce.



The Company was also previously in the
business of digit gaming (lottery). That license has been suspended.



The key business focus of the company is
to establish itself as the provider and creator of a new generation of entertainment-on-demand and e-commerce channels on broadband,
and 3G (third generation) devices.



The Company delivers both wire and wireless
solutions, streaming via computers, TV sets, PDAS and 3G hand phones.



The Company's business model in the area
of broadband entertainment includes e-services, which the Company believes will provide it with multiple streams of revenue. Such
revenues arederived from advertising and branding (channel and program sponsorship); on-line subscriptions; channel/portal development
(digital programming services); content aggregation and syndication; broadband consulting services; broadband hosting and streaming
services, and on-line dealerships and pay per view services.



2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



Basis of accounting and presentation



The consolidated financial statements include
the financial statements of Amaru, Inc. and its majority owned subsidiaries. All significant intercompany balances and transactions
have been eliminated in consolidation. In addition, the company evaluates its relationships with other entities to identify whether
they are variable interest entities as defined by Financial Accounting Standards Board (“FASB”) Accounting Standards
Codification (“ASC”) Section 810 “Consolidation” and assesses whether it is the primary beneficiary of
such entities. If the determination is made that the company is the primary beneficiary, then that entity is included in the consolidated
financial statements in accordance with ASC 810.



The unaudited interim consolidated financial
statements of the Company as of March 31, 2014 and for the three months period ended March 31, 2014 and 2013, have been prepared
in accordance with accounting principles generally accepted in the United States of America and the rules and regulations of the
SEC which apply to interim financial statements. Accordingly, they do not include all of the information and footnotes normally
required by accounting principles generally accepted in the United States of America for annual financial statements. In the opinion
of management, such information contains all adjustments, consisting only of normal recurring adjustments, necessary for a fair
presentation of the results for the periods presented. The interim consolidated financial information should be read in conjunction
with the consolidated financial statements and the notes thereto, included in the Company’s Form 10-K filed with the SEC.
The results of operations for the three months ended March 31, 2014 are not necessarily indicative of the results to be expected
for future quarters or for the year ending December 31, 2014.



All consolidated financial statements and
notes to the consolidated financial statements are presented in United States dollars (“US Dollar” or “US$”
or “$”).





F-8





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Presentation as a going concern



The accompanying condensed consolidated
financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America,
which contemplate continuation of the Company as a going concern. The Company has an accumulated deficit of $42,937,306 and $42,759,864
at March 31 2014 and December 31, 2013, respectively. The Company also has a working capital deficit of $3,020,671 and $3,107,722
at March 31, 2014 and December 31, 2013, respectively. The Company has had difficulty in raising adequate additional funding.



The items discussed above raise substantial
doubts about the Company's ability to continue as a going concern. The Company will require additional equity or debt financing
in order to execute its operating plan and continue as a going concern. The Company cannot predict whether this additional financing
will be in the form of equity, debt or another form. The Company may not be able to obtain the necessary equity or debt on a timely
basis, on acceptable terms, or at all. The Company plans also to attempt to address its working capital deficiency by increasing
its sales, maintaining strict expense controls and seeking strategic alliances.



In the event that these financing sources
do not materialize, or the Company is unsuccessful in increasing its revenues and ultimately returning to profitable operations,
the Company will be forced to further reduce its costs, may be unable to repay its debt obligations as they become due or respond
to competitive pressures, any of which circumstances would have a material adverse effect on its business, prospects, financial
condition and results of operations.



The financial statements do not include
any adjustments relating to the recoverability and reclassification of recorded asset amounts or amounts and reclassification of
liabilities that might be necessary, should the Company be unable to continue as a going concern.



Use of estimates



The preparation of financial statements
in conformity with accounting principles generally accepted in the United States of America requires management to make estimates
and assumptions that affect certain reported amounts of assets and liabilities and disclosures of contingent assets and liabilities
at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual
results could differ from those estimates.





F-9





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Cash



The Company considers all demand and time
deposits and all highly liquid investments with an original maturity of three months or less to be cash equivalents.



Accounts receivable



Accounts receivable is stated at cost,
net of an allowance for doubtful accounts, if required. Receivables outstanding longer than the payment terms are considered past
due. The Company maintains an allowance for doubtful accounts for estimated losses when necessary resulting from the failure of
customers to make required payments. The Company reviews the accounts receivable on a periodic basis and makes allowances where
there is doubt as to the collectability of individual balances. In evaluating the collectability of individual receivable balances,
the Company considers many factors, including the age of the balance, the customer’s payment history, its current credit-worthiness
and current economic trends.



Property and equipment



Property, plant and equipment are recorded
at cost, less accumulated depreciation. Cost includes the price paid to acquire or construct the asset, including capitalized interest
during the construction period, and any expenditures that substantially increase the assets value or extend the useful life of
an existing asset. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Major
repairs and betterments that significantly extend original useful lives or improve productivity are capitalized and depreciated
over the periods benefited. Maintenance and repairs are generally expensed as incurred. The estimated useful lives of the assets
range from 3 to 5 years.





F-10





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Film library



Investment in the Company's film library
includes movies, dramas, comedies and documentaries in which the Company has acquired distribution rights from a third party. For
acquired films, these capitalized costs consist of minimum guarantee payments to acquire the distribution rights. Costs of acquiring
the Company's film libraries are amortized using the individual-film-forecast method in accordance with ASC 926, “Entertainment-Films,"
whereby these costs are amortized and participations and residuals costs are accrued in the proportion that current year's revenue
bears to management's estimate of ultimate revenue at the beginning of the current year expected to be recognized from the exploitation,
exhibition or sale of the films. Ultimate revenue for acquired films includes estimates over a period not to exceed twenty years
following the date of acquisition. Investments in films are stated at the lower of amortized cost or estimated fair value.



The valuation of investment in films is
reviewed on an overall basis, when an event or change in circumstances indicates that the fair value of the film library is less
than its unamortized cost. The fair value of the film is determined using management's future revenue and cost estimates and a
discounted cash flow approach. Additional amortization is recorded in the amount by which the unamortized costs exceed the estimated
fair value of the film. Estimates of future revenue involve measurement uncertainty and it is therefore possible that reductions
in the carrying value of investment in films may be required as a consequence of changes in management's future revenue estimates.
(See Note7).



Intangible assets



Intangible assets consist of gaming, software
license and product development costs. Intangible assets which were purchased for a specific period are stated at cost less accumulated
amortization and impairment losses. Such intangible assets are reviewed for impairment in accordance with ASC 350, “Intangibles-Goodwill
and Other”. Such intangible assets are amortized over the period of the contract, which is 2 to 18 years.





F-11





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Investments



The Company classifies its investments
in marketable equity and debt securities as "available-for-sale", "held to maturity" or "trading"
at the time of purchase in accordance with "Accounting for Certain Investments in Debt and Equity Securities." Equity
securities held for trading as of March 31, 2014 and December 31, 2013 were nil, respectively. The changes relates to an unrealized
gain and loss of was nil for March 31, 2014. An unrealized loss of $21,906 was recognized for March 31, 2013.



Available-for-sale securities are carried
at fair value with unrealized gains and losses, net of related tax, if any, reported as a component of other comprehensive income
(loss) until realized. Realized gains and losses from the sale of available-for-sale securities are determined on a specific-identification
basis. A decline in the market value of any available-for-sale security below cost that is deemed to be other than temporary will
result in an impairment, which is charged to earnings.



Investments that are not publicly traded
or have resale restrictions greater than one year are accounted for at cost. The Company's cost method investments include companies
involved in the broadband and entertainment industry. The Company uses available qualitative and quantitative information to evaluate
all cost method investments for impairment at least annually. An impairment is booked when there is an other-than-temporary difference
between the carrying amount and fair value of the investment that would result in a loss. Please also see Notes 7 and 8 to consolidated
financial statements.





F-12





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Valuation of long-lived assets



The Company accounts for long-lived assets
under ASC 360,” Property, Plant, and Equipment”. Management assesses the recoverability of its long-lived assets, which
consist primarily of fixed assets and intangible assets with finite useful lives, whenever events or changes in circumstance indicate
that the carrying value may not be recoverable. The following factors, if present, may trigger an impairment review: (i) significant
underperformance relative to expected historical or projected future operating results; (ii) significant negative industry or economic
trends; (iii) significant decline in the Company's stock price for a sustained period; and (iv) a change in the Company's market
capitalization relative to net book value. If the recoverability of these assets is unlikely because of the existence of one or
more of the above-mentioned factors, an impairment analysis is performed using a projected discounted cash flow method. Management
must make assumptions regarding estimated future cash flows and other factors to determine the fair value of these respective assets.
If these estimates or related assumptions change in the future, the Company may be required to record an impairment charge. Impairment
charges would be included in the Company's consolidated statements of operations, and would result in reduced carrying amounts
of the related assets on the Company's consolidated balance sheets.



Fair value of financial instruments



FASB ASC 820,
“Fair Value Measurement,” defines fair value as the price that would be received upon sale of an asset or paid
upon transfer of a liability in an orderly transaction between market participants at the measurement date and in the principal
or most advantageous market for that asset or liability. The fair value should be calculated based on assumptions that market participants
would use in pricing the asset or liability, not on assumptions specific to the entity.





F-13





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Advances from related party



Advances from a director and related party
of $300,403 at March 31, 2014 and December 31, 2013, respectively, are unsecured, non-interest bearing and payable on demand.



Foreign currency translation



Transactions in foreign currencies are
measured and recorded and translated to the functional currency, U.S. dollars, using the Company's prevailing month exchange rate.
At the balance sheet date, recorded monetary balances that are denominated in a foreign currency are adjusted to reflect the rate
at the balance sheet date and the operations statement accounts using the average exchange rates throughout the period. Translation
gains and losses are recorded in stockholders' equity as other Comprehensive income and realized gains and losses from foreign
currency transactions are reflected in operations. Translation gains or losses as of March 31, 2014 and 2013 were not material
to the consolidated financial statements.



Revenues



The Company's primary sources of revenue
are from the sales of advertising space on interactive websites owned by the Company; distribution and licensing of content to
our partners, broadband consulting services, and gaming revenue from our digital games.



The Company recognizes revenue in accordance
with Accounting Standard Codification (ASC) 605-10 Revenue is recognized only when the price is fixed or determinable, persuasive
evidence of an arrangement exists, the service or product is performed or delivered and collectability of the resulting receivable
is reasonably assured.





F-14





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Revenues (continued)



Website advertising revenue is recognized
on a cost per thousand impressions (CPM) or cost per click (CPC), and flat-fee basis. The Company earns CPM or CPC revenue from
the display of graphical advertisements. An impression is delivered when an advertisement appears in pages viewed by users. Revenue
from graphical advertisement impressions is recognized based on the actual impressions delivered in the period. Revenue from flat-fee
services is based on a customer's period of contractual service and is recognized on a straight-line basis over the term of the
contract. Proceeds from subscriptions are deferred and are included in revenue on a pro-rata basis over the term of the subscriptions.



The Company enters into contractual arrangements
with customers to license and distribute content; revenue is earned from content licenses, and content syndication. Agreements
with these customers are typically for multi-year periods. For each arrangement, revenue is recognized when both parties have signed
an agreement, the fees to be paid by the customer are fixed or determinable, collection of the fees is probable, the delivery of
the service has occurred, and no other significant obligations on the part of the Company remain. Licensing and content syndication
revenue is recognized when the license period begins, and the contents are available for exploitation by the customer, pursuant
to the terms of the license agreement.



The Company enters into contractual arrangements
with customers on broadband consulting services and on-line turnkey solutions. Revenue is earned over the period in which the services
are rendered. For each arrangement, revenue is recognized when a written agreement between both parties exist, the fees to be paid
by the customer are fixed or determinable, collection of the fees is probable, and fulfillment of the obligations under the agreement
has occurred. Revenue from broadband consulting services and on-line turnkey solutions is recognized over the period in which the
services are rendered, by reference to completion of the specific transaction assessed on the basis of the actual services provided
as a proportion of the total services to be performed. It is generally recognized from the date of acceptance and fulfillment of
obligations under the sale and purchase agreement.





F-15





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Cost of services



The cost of services pertaining to advertising
and sponsorship revenue and subscription and related services are the cost of bandwidth charges, channel design and alteration,
copyright licensing, and hardware hosting and maintenance costs. The cost of services pertaining to E-commerce revenue is channel
design and alteration, and hardware hosting and maintenance costs. All these costs are accounted for in the period incurred.



Income taxes



Deferred income taxes are determined using
the liability method in accordance with ASC 740, “Income Taxes.” Deferred tax assets and liabilities are recognized
for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets
and liabilities and their respective tax bases. Deferred income taxes are measured using enacted tax rates expected to apply to
taxable income in years in which such temporary differences are expected to be recovered or settled. The effect on deferred income
taxes of a change in tax rates is recognized in the statement of income of the period that includes the enactment date. In addition,
a valuation allowance is established to reduce any deferred tax asset for which it is determined that it is more likely than not
that some portion of the deferred tax asset will not be realized.



The Company files income tax returns in
the United States federal jurisdiction and certain states in the United States and certain other foreign jurisdictions. The Company
is beyond the statute of limitations subjecting it to U.S. federal and state income tax examinations by tax authorities for years
before 2010. No income tax returns are currently under examination by any tax authorities.





F-16





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)



Income (Loss) per share



The Company computes net income (loss)
per common share in accordance with FASB ASC 260, "Earnings Per Share" ("ASC 260") and SEC SAB 98. Under the
provisions of ASC 260 and SAB 98, basic net income (loss) per common share is computed by dividing the net income (loss) available
to common shareholders by the weighted average number of shares of common stock outstanding during the period. Diluted income per
share includes the effect of dilutive common stock equivalents from the assumed exercise of convertible preferred stock. The Company’s
common stock equivalents were excluded in the computation of diluted net (loss) per share since thir inclusion would be anti-dilutive.
These common stock equivalents may dilute future earnings per share.



Advertising



The cost of advertising is expensed as
incurred. For the three months ended March 31, 2014 and 2013, the Company incurred advertising expenses of $3,183 and $1,698, respectively.





F-17





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





3. RECENTLY ISSUED ACCOUNTING STANDARDS



In March 2014, the FASB issued ASU No.
2014-06, “Technical Corrections and Improvements Related to Glossary Terms”. This ASU provides technical corrections
and improvements to Accounting Standards Codification glossary terms. The adoption of this pronouncement, effective March 14, 2014,
is not expected to have a material effect on the Company’s consolidated financial statements.



In July 2013, FASB issued ASU No. 2013-11,
“Presentation of an Unrecognized Benefit When a Net Operating Loss Carryforward”, a Similar Tax Loss, or a Tax
Credit Carryforward Exists. This ASU requires an unrecognized tax benefit to be presented in the financial statements as a reduction
to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward. An exception exists
to the extent that a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the
reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the
disallowance of a tax position or the tax of the applicable jurisdiction does not require the entity to use, and entity does not
intend to use, the deferred tax asset for such a purpose, the unrecognized tax benefit should be presented in the financial statements
as a liability and should not be combined with deferred tax assets. ASU No. 2013-11 is effective for fiscal years and interim periods
beginning after December 15, 2013 and is not expected to have a material impact on the Company's consolidated financial statements.



On March 5, 2013, the FASB issued ASU 2013-05
to provide guidance for whether to release cumulative translation adjustments (“CTA”) upon certain derecognition events.
The update was issued to resolve the diversity in practice about whether Subtopic ASC 810-10, “Consolidation-Overall,”
or ASC 830-30, “Foreign Currency Matters-Translation of Financial Statements,” applies to such transactions. ASU 2013-05
is effective prospectively for all entities with derecognition events after the effective date. For public entities, the guidance
is effective for fiscal years, and interim periods within those years, beginning after December 31, 2013. ASC 830-30 applies when
an entity ceases to have a controlling financial interest in a subsidiary or group of assets that is a business within a foreign
entity. Consequently, the CTA is released into net income only if the transaction results in complete or substantially complete
liquidation of the foreign entity in which the subsidiary or group of assets resided. Otherwise, no portion of the CTA is released.
The adoption of this pronouncement is not expected to have a significant impact on the Company’s consolidated financial condition
or results of operations.





F-18





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





4. OTHER CURRENT ASSETS



Other current assets consist of the following:



|                  |  | March 31,2014 |         |  | December 31,2013 |  
|----------------- |  | ------------- | ------- |  | ---------------- | -
|Prepayments       |  | $             | 32,987  |  |                  | $
|Deposits          |  |               | 35,714  |  |                  |  
|Loan receivable   |  |               | 100,000 |  |                  |  
|Other receivables |  |               | 26,845  |  |                  |  
|                  |  | $             | 195,546 |  |                  | $



A $100,000 non-interest bearing loan that
was made to a third party has been included in other receivables as of March 31, 2014 and December 31, 2013.



5.
Fair value measurementS



FASB ASC 820, “Fair Value Measurement,”
specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions other
market participants would use based upon market data obtained from independent sources (observable inputs). In accordance with
ASC 820, the following summarizes the fair value hierarchy:





| | Level 1 Inputs – | Unadjusted quoted market prices for identical assets and liabilities in an active market that the Company has the ability to access.
| | ---------------- | ------------------------------------------------------------------------------------------------------------------------------------
| |                  |                                                                                                                                     
| | Level 2 Inputs – | Inputs other than the quoted prices in active markets that are observable either directly or indirectly.                            
| |                  |                                                                                                                                     
| | Level 3 Inputs – | Inputs based on prices or valuation techniques that are both unobservable and significant to the overall fair value measurements.   





ASC 820 requires the use of observable
market data, when available, in making fair value measurements. When inputs used to measure fair value fall within different levels
of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant
to the fair value measurements. Valuation techniques used need to maximize the use of observable inputs and minimize the use of
unobservable inputs. As of March 31, 2014 and December 31, 2013, none of the Company’s assets and liabilities were required
to be reported at fair value on a recurring basis. Carrying values of non-derivative financial instruments, including cash, payables
and accrued liabilities, approximate their fair values due to the short term nature of these financial instruments. There were
no changes in methods or assumptions during the periods presented.



6. PROPERTY AND EQUIPMENT



Property and equipment consist of the following:



|                                |  | December 31,2014 |            |   | December 31,
        2013 |  
|------------------------------- |  | ---------------- | ---------- | - | ------------------------- | -
|Office equipment                |  | $                | 930,709    |   |                           | $
|Motor vehicle                   |  |                  | 11,000     |   |                           |  
|Furniture, fixture and fittings |  |                  | 89,960     |   |                           |  
|Pony set-top boxes              |  |                  | 843,946    |   |                           |  
|                                |  |                  | 1,875,615  |   |                           |  
|Accumulated depreciation        |  |                  | (1,873,556 | ) |                           |  
|                                |  | $                | 2,059      |   |                           | $



Depreciation expense was $879 and $1,766
for the three months ended March 31, 2014 and 2013, respectively.





F-19





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





7. FILM LIBRARY



Film library consist of the following:



|                           |  | March 31,
2014 |             |   | December 31,
2013 |  
|-------------------------- |  | -------------- | ----------- | - | ----------------- | -
|                           |  |                |             |   |                   |  
|Acquired film library      |  | $              | 23,686,731  |   |                   | $
|Accumulated amortization   |  |                | (4,520,325  | ) |                   |  
|                           |  |                | 19,166,406  |   |                   |  
|Impairment of film library |  |                | (19,166,406 | ) |                   |  
|Film library               |  | $              | –           |   |                   | $



No amortization expense was incurred for the three months ended
March 31, 2014 or 2013.



8. INTANGIBLE ASSETS



Intangible assets consist of the following:



|                                 |  | March 31, 
2014 |            |   | December 31,
2013 |  
|-------------------------------- |  | --------------- | ---------- | - | ----------------- | -
|                                 |  |                 |            |   |                   |  
|Finite-lived intangible assets   |  |                 |            |   |                   |  
|Gaming license                   |  | $               | 7,090,000  |   |                   | $
|Product development expenditures |  |                 | 719,220    |   |                   |  
|Software license                 |  |                 | 12,649     |   |                   |  
|                                 |  |                 | 7,821,869  |   |                   |  
|Accumulated amortization         |  |                 | (1,974,328 | ) |                   |  
|                                 |  |                 | 5,847,541  |   |                   |  
|Impairment loss                  |  |                 | (5,847,541 | ) |                   |  
|                                 |  | $               | –          |   |                   | $



No amortization expense was incurred for the three months ended
March 31, 2014 or 2013.





F-20





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





9. INVESTMENTS - NET



Investments held at cost consist of the following:



|                                  |  | March 31, 
2014 |            |   | December 31,
2013 |  
|--------------------------------- |  | --------------- | ---------- | - | ----------------- | -
|                                  |  |                 |            |   |                   |  
|Current:                          |  |                 |            |   |                   |  
|Unquoted securities               |  | $               | –          |   |                   | $
|                                  |  |                 |            |   |                   |  
|Non-current:                      |  |                 |            |   |                   |  
|Unquoted securities               |  |                 | 2,802,613  |   |                   |  
|Impairment on unquoted securities |  |                 | (2,802,613 | ) |                   |  
|                                  |  | $               | –          |   |                   | $



The Company's $2,802,613 investment at
cost relates to a casino that operates in Cambodia. This investment is subject to numerous risks, including:



-difficulty enforcing
agreements through the Cambodia's legal system;

-general economic and
political conditions in Cambodia; and

-the Cambodian government may
adopt regulations or take other actions that could directly or indirectly harm the investment's business and growth strategy.



The occurrence of any one of the above
risks could harm this investment's business and results of operations. Management reviews this investment on a quarterly basis.
For the three months ended March 31, 2014 and 2013, charges of impairment on the investment were nil, respectively.





F-21





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





10. COMMITMENTS



Operating Leases



The Company leases one of its offices at
a monthly rental of approximately $9,834 under an operating lease which expired on August 14, 2012 and subsequently renewed until
August 14, 2014. Total rental expense under operating leases for the three months ended March 31, 2014 and 2013 was $28,350 and
$29,226, respectively.



11. INCOME TAXES



The Company files separate tax returns
for Singapore and the United States of America.



The Company had approximately $5,200,000
in deferred tax assets as of March 31, 2014 and December 31, 2013, respectively. The Company provided a full allowance of $5,200,000
as of March 31, 2014 and December 31, 2013, respectively



The Company had available approximately
$8,100,000 of unused U.S. net operating loss carry-forwards at March 31, 2014, that may be applied against future taxable income.
These net operating loss carry-forwards expire for U.S. income tax purposes beginning in 2033. There is no assurance the Company
will realize the benefit of the net operating loss carry-forwards.



The Company requires a valuation allowance
to be recorded when it is more likely than not that some or all of the deferred tax assets will not be realized. As of March 31,
2014, the Company maintained a valuation allowance for the U.S. deferred tax asset due to uncertainties as to the amount of the
taxable income from U.S. operations that will be realized.



The Company had available approximately
$11,300,000 of unused Singapore tax losses and capital allowance carry-forwards at March 31, 2014 and December 31, 2013, respectively,
that may be applied against future Singapore taxable income indefinitely provided the company satisfies the shareholdings test
for carry-forward of tax losses and capital allowances.





F-22





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





12. CONVERTIBLE TERM LOAN



|                 |  | March 31,
        2014 |           |  | December 31,
        2013 |  
|---------------- |  | ---------------------- | --------- |  | ------------------------- | -
|                 |  |                        |           |  |                           |  
|Current:         |  |                        |           |  |                           |  
|Convertible loan |  | $                      | 1,499,750 |  |                           | $
|                 |  | $                      | 1,499,750 |  |                           | $



The convertible loan represents a two year
convertible loan drawn down by a subsidiary company, M2B World Asia Pacific Pte. Ltd.. It bears interest at a fixed rate of 5.0%
per annum. The loan allowed the lender the option to convert the loan into shares of the subsidiary company at the issue price
of $0.942 per share at the end of the two year period. The due date of the loan was July 7, 2010. The conversion period of the
convertible loan was extended for an additional twelve months commencing July 8, 2010 and was further extended to June 29, 2012.
M2B World Asia Pacific Pte. Ltd. is negotiating to obtain a further extension on the convertible loan. The accrued interest was
$24,022 and $26,582 for the three months ended March 31, 2014 and 2013, respectively.





F-23





AMARU, INC. AND SUBSIDIARIES



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND 2013 (UNAUDITED)





13. CONTINGENCIES:



On October 16, 2013, M2B World Asia Pacific
Pte Ltd. (“Plaintiff”), a subsidiary of the Company, filed a civil claim against a director (“Defendant”)
of a subsidiary of a company listed on the Singapore Stock Exchange for repayment of US$1,000,000, representing a commission received
in advance by the Defendant in exchange for procurement of a significant advertising contract on the Plaintiff’s behalf.  
On March 7, 2014, a judgment was rendered in favor of the Plaintiff in the sum of US$1,000,000 and interest at the rate of 5.33%
per annum from the date of the claim. On April 7, 2014, the Defendant filed an appeal to the highest court.



Since the ultimate outcome of this matter cannot be determined
at this time, the Company’s consolidated financial statements do not include any adjustments that might result from the future
outcome of this uncertainty.



14. ISSUANCE OF PREFERRED STOCK







As of March 31, 2014, the Company issued
a total of 3,640,000 shares of Series B Convertible Preferred Stock (“Preferred Stock”) through its private
placement of shares of Preferred Stock for a total of $300,000, to
“accredited investors,” as that term is defined in Regulation D of the Securities Act of 1933. Each share of
Series B Convertible Preferred Stock is convertible into ten (10) shares of common stock.



15. SUBSEQUENT EVENTS



On April 17, 2014, the Company issued a
total of 1,000,000 shares of Series B Convertible Preferred Stock ("Preferred Stock") through its private placement of
shares of Preferred Stock at a purchase price of $0.10 per share for a total amount of $100,000, to "accredited investors",
as that term is defined in Regulation D of the Securities Act of 1933. Each share of Series B Convertible Preferred Stock is convertible
into ten (10) shares of common stock. The proceeds of the private placement were used for working capital.







F-24





ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS



PRELIMINARY NOTE REGARDING FORWARD-LOOKING
STATEMENTS



ALL FORWARD-LOOKING STATEMENTS CONTAINED
HEREIN ARE DEEMED BY THE COMPANY TO BE COVERED BY AND TO QUALIFY FOR THE SAFE HARBOR PROTECTION PROVIDED BY THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995. PROSPECTIVE SHAREHOLDERS SHOULD UNDERSTAND THAT SEVERAL FACTORS GOVERN WHETHER ANY FORWARD - LOOKING
STATEMENT CONTAINED HEREIN WILL BE OR CAN BE ACHIEVED. ANY ONE OF THOSE FACTORS COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY
FROM THOSE PROJECTED HEREIN. THESE FORWARD - LOOKING STATEMENTS INCLUDE PLANS AND OBJECTIVES OF MANAGEMENT FOR FUTURE OPERATIONS,
INCLUDING PLANS AND OBJECTIVES RELATING TO THE PRODUCTS AND THE FUTURE ECONOMIC PERFORMANCE OF THE COMPANY. ASSUMPTIONS RELATING
TO THE FOREGOING INVOLVE JUDGMENTS WITH RESPECT TO, AMONG OTHER THINGS, FUTURE ECONOMIC, COMPETITIVE AND MARKET CONDITIONS, FUTURE
BUSINESS DECISIONS, AND THE TIME AND MONEY REQUIRED TO SUCCESSFULLY COMPLETE DEVELOPMENT PROJECTS, ALL OF WHICH ARE DIFFICULT OR
IMPOSSIBLE TO PREDICT ACCURATELY AND MANY OF WHICH ARE BEYOND THE CONTROL OF THE COMPANY. ALTHOUGH THE COMPANY BELIEVES THAT THE
ASSUMPTIONS UNDERLYING THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN ARE REASONABLE, ANY OF THOSE ASSUMPTIONS COULD PROVE INACCURATE
AND, THEREFORE, THERE CAN BE NO ASSURANCE THAT THE RESULTS CONTEMPLATED IN ANY OF THE FORWARD - LOOKING STATEMENTS CONTAINED HEREIN
WILL BE REALIZED. BASED ON ACTUAL EXPERIENCE AND BUSINESS DEVELOPMENT, THE COMPANY MAY ALTER ITS MARKETING, CAPITAL EXPENDITURE
PLANS OR OTHER BUDGETS, WHICH MAY IN TURN AFFECT THE COMPANY'S RESULTS OF OPERATIONS. IN LIGHT OF THE SIGNIFICANT UNCERTAINTIES
INHERENT IN THE FORWARD - LOOKING STATEMENTS INCLUDED THEREIN, THE INCLUSION OF ANY SUCH STATEMENT SHOULD NOT BE REGARDED AS A
REPRESENTATION BY THE COMPANY OR ANY OTHER PERSON THAT THE OBJECTIVES OR PLANS OF THE COMPANY WILL BE ACHIEVED.



General



The Company is in the business of broadband
entertainment-on-demand, streaming via computers, television sets, and 3G (Third Generation) devices and the provision of broadband
services. Its business includes channel and program sponsorship (advertising and branding); online subscriptions, channel/portal
development (digital programming services); content aggregation and syndication, broadband consulting services, broadband hosting
and streaming services and E-commerce.



The Company was also in the business of
digit gaming (lottery). The Company has an 18 year license to conduct nationwide lottery in Cambodia. The Company through its subsidiary,
M2B Commerce Limited, signed an agreement with Allsports Limited, a British Virgin Islands company to operate and conduct digit
games in Cambodia and to manage the digit games in Cambodia. On March 25, 2009, the Company was notified that the digit games were
suspended by the Cambodia Government as part of the suspension of all lotteries in Cambodia. Although the Company is still a holder
of the license, it cannot use it for the gaming business until the suspension of the digit games is lifted. At this time, the suspension
of the digit games is expected to be permanent as the Government of Cambodia has closed the gaming business by the order of its
Ministry of Economy and Finance.



The following discussion should be read
in conjunction with the financial statements and notes to financial statements.



OVERVIEW



The business focus of the Company is Entertainment-on-Demand
and E-Commerce Channels on Broadband, and 3G (Third Generation) devices.



For the broadband, the Company delivers
both wire and wireless solutions, streaming via computers, TV sets, PDAs and 3G hand phones.



The Company's business model in the area
of broadband entertainment includes focuses on e-services, which would provide the Company with multiple streams of revenue. Such
revenues would be derived from advertising and branding (channel and program sponsorship); on-line subscriptions; channel/portal
development (digital programming services); content aggregation and syndication; broadband consulting services; broadband hosting
and streaming services; and on-line dealerships; and pay per view services.



In fiscal 2008, the business was reorganized
under the following entities to spearhead the expansion of the Company's business and focus on specific growth areas and territories.



1





M2B WORLD PTE. LTD.



M2B World Pte. Ltd. was incorporated on
April 3, 2003. This subsidiary used to oversee the management and operation of the Company as a whole and oversees the Asian business.
With effect from September 1, 2006, the Company's Asian business was overseen by another subsidiary, M2B World Asia Pacific Pte.
Ltd.



The Company took an investment on May 16,
2005 for a 9.1% equity position with a company called Activ Lifestyle Pte Ltd in Singapore to help facilitate Amaru Inc.'s diversification
into the health and wellness market.On September 27, 2005, the Company raised its investment in Activ Lifestyle Pte Ltd to 12.6%.
This was further increased to 17.4% as of December 31, 2006.



In December 2005, M2B World Pte. Ltd. sold
81% equity interests of its wholly-owned subsidiary, M2B Game World Pte. Ltd. to Auston International Group Ltd (Auston), a public
listed company in Singapore, in exchange for 27% equity interest in Auston. As of December 31, 2008, the Company disposed all of
its common shares in Auston. As of the date of this report, the Company holds no shares in Auston.



M2B WORLD, INC.



M2B World, Inc., a California corporation,
was incorporated on January 24, 2005. This subsidiary handles and oversees the Company's business in the U.S. The Company has not
renewed its office lease in West Hollywood in August 2011, and currently does not maintain an office space in the US.



On May 27, 2005, M2B World, Inc. entered
into an agreement with Indie Vision Films, Inc., a California corporation, to purchase 20% of the beneficial ownership of Indie
Vision Films, Inc. which provided to M2B World, Inc. access the library of programs of Indie Vision Films, Inc. The Company entered
into an agreement on December 22, 2009 with Indie Vision Films, Inc to convert its investment into content rights, thereby giving
up its 20% share of beneficial ownership in lieu of library rights that the Company could exploit commercially for international
use.



M2B WORLD ASIA PACIFIC PTE. LTD.



M2B World Asia Pacific Pte Ltd was incorporated
in the Republic of Singapore on 1 August 2006 for the purposes of handling all the business operations of the Company in the Asia
Pacific region. This company had taken over the Asian business operations as well as the assets and liabilities of M2B World Pte.
Ltd. with effect from September 1, 2006.



On January 3, 2007, M2B World Asia Pacific
Pte Ltd, issued 7,778,014 shares of common stock through a private placement at a price of $0.77 a share for a total amount of
$6,000,000. This had effectively reduced the Company's effective equity interest in M2B World Asia Pacific Pte. Ltd from 100% to
81.6%.



On July 8, 2008, M2B World Asia Pacific Pte Ltd signed a two
year convertible loan agreement with a third party to raise $2,500,000 in funding. The loan allows the borrower to convert the
loan into shares of the Company at the issue price of $0.942 per share at the end of the two years period. The loan bears an interest
rate of 5.0% per annum, and will mature in July 7, 2010. The note was obtained from a company in which a board of director is the
Joint Company Secretary of the lender. The conversion period of the convertible loan was extended for an additional twelve months
commencing July 8, 2010 and was further extended to November 30, 2011.  The loan was further granted extension to June
29, 2012 and an extension of the due date is being negotiated.



M2B COMMERCE LIMITED



M2B Commerce Limited, a company incorporated
in the British Virgin Islands on July 25, 2002, focuses on e-commerce and digit gaming, with a branch in Cambodia that oversees
the digit gaming operation in Cambodia.



The Company has an agreement with Allsports
Limited, a British Virgin Islands company to operate, administer, and manage the lottery digit game activities in Cambodia, as
an extension of the Company's entertainment operations. On March 25, 2009, the Company was notified that the digit game were suspended
by the Cambodia Government as part of the suspension of all lotteries in Cambodia. At this time, the Company believes that the
suspension of the digit game is permanent as the Government of Cambodia has closed the gaming business by the order of its Ministry
of Economy and Finance.



The company had entered into an investment
agreement on January 12, 2006, with Khoo Kim Leng, the beneficial owner of Dai Long Co., Ltd, which holds a valid casino license
and freehold land and intends to develop and operate an integrated resort in the Kingdom of Cambodia. The resort will feature a
hotel, guest house, shopping arcade, entertainment and amusement center and some gaming tables. The resort was completed and is
in operation in 2006. As of December 31, 2011, the company had invested $2,802,613 in relation to this investment. This investment
had been fully impaired as of March 31, 2014.



2





M2B ENTERTAINMENT, INC.



On April 19, 2010, M2B Entertainment, Inc. was dissolved because
the Company did not want to continue operations in Canada.



M2B AUSTRALIA PTY LTD



M2B Australia Pty Ltd was incorporated
on June 15, 2005. This subsidiary handles and oversees the Company's business in Australia. As of March 31, 2013, this subsidiary
is dormant.



M2B WORLD TRAVEL SINGAPORE PTE. LTD.



M2B World Travel Singapore Pte Ltd was incorporated in the Republic
of Singapore on March 7, 2006. This subsidiary of M2B World Travel Limited launches a global online travel platform which offers
global e-travel services.



On October 14, 2011, M2B World Travel Singapore
was dissolved because the Company did not want to continue its travel operations.



AMARU HOLDINGS LIMITED AND M2B WORLD HOLDINGS
LIMITED



Amaru Holdings Limited and M2B World Holdings
Limited are incorporated in the British Virgin Islands on February 21, 2005 and June 15, 2006, respectively. Amaru Holdings Limited
focuses on content syndication and distribution in areas other than Asia Pacific region. M2B World Holdings Limited focuses on
content syndication and distribution in Asia Pacific region and is a subsidiary of M2B World Asia Pacific Pte. Ltd.



TREMAX INTERNATIONAL LIMITED AND M2B WORLD
TRAVEL LIMITED



Tremax International Limited and M2B World
Travel Limited are both incorporated in the British Virgin Islands on June 8, 2006 and May 3, 2005 respectively. Both companies
are investment holdings companies.



On July 10, 2007, Tremax International
Limited entered into a sale and purchase agreement (the "Agreement") with Domaine Group Limited, a British Virgin Islands
corporation (the "Vendor"), for the acquisition of CBBN Holdings Limited ("CBBN Holdings"). CBBN Holdings is
a 80% beneficial owner of Cosmactive Broadband Networks Co. Ltd ("CBN"), which is a broadband service provider incorporated
in Taiwan. The purchase consideration is satisfied in full by the issuance of 5,333,333 of common stock of the Company.



On January 22, 2009, the Company approved
the termination and rescission of the Agreement, because the seller failed to comply with the terms of the Agreement and did not
deliver to the Company or Purchaser the consideration for the issuance of the Amaru Shares. The Company further approved the cancellation
of the Amaru Shares.



RESULTS OF OPERATIONS



REVENUE



Financial Statement



|• |  | Revenue for the three months ended March 31, 2014 was $7,801 compared with $6,910 for the same period in 2013.
|- |  | --------------------------------------------------------------------------------------------------------------



|• |  | The Company's cash balance was $77,992 at March 31, 2014 compared with $33,338 at December 31, 2013.
|- |  | ----------------------------------------------------------------------------------------------------



Revenue



Revenue from entertainment for the three
months ended March 31, 2014 at $7,801 was higher than revenue of $6,910 for the three months ended March 31, 2013 by $891 (13%).
It was mainly due to an increase in content distribution and licensing revenue from new customers for the three months ended March
31, 2014.



3





Cost of Services



Cost of services for the three months ended
March 31, 2014 was $32,772 which increased by $7,549 (30%) from $25,223 for the three months ended March 31, 2013. It was mainly
due to increase in cost spending on website design, maintenance and other related production costs by $5,907 (58%) from $10,250
for the three months ended March 31, 2013 to $16,157 for the three months ended March 31, 2014.

DISTRIBUTION EXPENSES



Distribution expenses for the three months
ended March 31, 2014 at $14,519 were higher by $10,064 (226%) as compared to the amount of $4,455 incurred for the three months
ended March 31, 2013.



The higher distribution expenses were attributed
to increase spending on transportation expenses which increased by $5,821 (3,216%) from $181 for the three months ended March 31,
2013 to $6,002 for the three months ended March 31, 2014.



BAD DEBTS WRITTEN OFF



The bad debts written off in 2013 were
primarily attributed to the write off of the long outstanding balance of $88,700 from previous accounts receivable and other current
assets. There were no bad debts written off for the three months ended March 31, 2014.



GENERAL AND ADMINISTRATIVE EXPENSES



Administration expenses for the three months
ended March 31, 2014 at $176,176 were lower by $83,281 (32%) as compared to the amount of $259,457 incurred for the three months
ended March 31, 2013.



The decrease in administrative expenses
for the period ended March 31, 2014 was attributed mainly to the decreasein:



|• |  | Total staff costs had decreased by $12,941 (12 %), from $105,868 for the three months ended March 31, 2013 to $92,927 for the period ended March 31, 2014. .
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------



|• |  | Legal and professional expenses had decreased by $13,545 (31%), from $44,341 for the three months ended March 31, 2013 to $30,796 for the three months ended March 31, 2014.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------



LOSS FROM OPERATIONS



The Company incurred a loss from operations
of $215,666 for the three months ended March 31, 2014 as compared to the loss from operations of $370,925 for the three months
ended March 31, 2013 mainly due to decrease in general and administrative expenses and no bad debts were being written off.



NET LOSS BEFORE NON-CONTROLLING INTERESTS



Net loss before non-controlling interesets
for the three months ended March 31, 2014, was $213,828 which decreased by $193,087 (47%) from net loss of $406,915 for the three
months ended March 31, 2013, it was mainly due to decrease in operation and administrative expenses for the three months ended
March 31, 2014.



LIQUIDITY AND CAPITAL RESOURCES



The Company had cash at $77,992 at March
31, 2014 as compared to cash of $33,338 at December 31, 2013.



The
Company does not finance its operations through short-term bank credit nor long-term bank loans. Its operations were financed by the proceeds through its private placement of shares.



During the three months ended March 31,
2014, the Company had not entered into any transactions using derivative financial instruments or derivative commodity instruments.
Accordingly the Company believes its exposure to market interest rate risk is not material.



Cash generated from operations will not
be able to cover the Company's intended growth and expansion. The Company has plans in 2014 to expand its broadband coverage by
launching new broadband sites in Asia Pacific region and Australia. No assurances can be made that such plans will be carried out
in a timely manner.



The Company intends to raise additional
funds, to fund its business expansion; however no assurances can be made that the Company will raise sufficient funds as planned.



4





ITEM 3: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK



The
primary objective of our investment activities is to preserve principal while concurrently maximizing the income we receive from
our investments without significantly increasing risk. Some of the securities that we may invest in may be subject to market risk.
This means that a change in prevailing interest rates may cause the principal amount of the investment to fluctuate. For example,
if we hold a security that was issued with a fixed interest rate at the then-prevailing rate and the prevailing interest rate later
rises, the current value of the principal amount of our investment will decline. To minimize this risk in the future, we intend
to maintain our portfolio of cash equivalents and short-term investments in a variety of securities, including commercial paper,
money market funds, high-grade corporate bonds, government and non- government debt securities and certificates of deposit. In
general, money market funds are not subject to market risk because the interest paid on such funds fluctuates with the prevailing
interest rate. The Company held Nil in marketable securities
as of March 31, 2014 and December 31, 2013 respectively.



The Company does not believe that it faces
material market risk with respect to its cash and cash equivalents which totaled $77,992 and $33,338 at March 31, 2014 and December
31, 2013, respectively.



The Company has no other material long-term
obligations or hedging activities other than the convertible term with an outstanding balance of $1,499,750 as of March 31, 2014.
The convertible loan represents a two year convertible loan drawn down by a subsidiary company, M2B World Asia Pacific Pte. Ltd..
It bears interest at a fixed rate of 5.0% per annum. The loan allowed the lender the option to convert the loan into shares of
the subsidiary company at the issue price of $0.942 per share at the end of the two year period. The due date of the loan was July
7, 2010. The conversion period of the convertible loan was extended for an additional twelve months commencing July 8, 2010 and
was further extended to June 29, 2012. M2B World Asia Pacific Pte. Ltd. is negotiating to obtain a further extension on the convertible
loan.



ABILITY TO EXPAND CUSTOMER BASE



The Company's future operating results
depend on our ability to expand our customer base for broadband services and e-commerce portals. An increase in total revenue depends
on our ability to increase the number of broadband and e-commerce portals, in the US, Europe and Asia. The degree of success of
this depends on



|• |  | our efforts to establish independent broadband sites in countries where conditions are suitable.
|- |  | ------------------------------------------------------------------------------------------------



|• |  | our ability to expand our offerings of content in entertainment and education, to include more niche channels and offerings.
|- |  | ----------------------------------------------------------------------------------------------------------------------------



|• |  | our ability to provide content beyond just personal computers but to encompass television, wireless application devices and 3G hand phones.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------



ABILITY TO ACQUIRE NEW MEDIA CONTENTS



The continued ability of the Company to
acquire rights to new media contents, at competitive rates, is crucial to grow and sustain the Company's business.



AVAILABILITY OF TECHNOLOGICALLY RELIABLE
NEW GENERATION OF BROADBAND DEVICES



The growth of demand for broadband services
is dependent on the wide availability of technologically reliable new generation of broadband devices, at affordable prices to
prospective customers of broadband services. The early and widespread availability and market adoption of new generation broadband
devices, will significantly impact demand for broadband services and the growth of the Company's business.



CAPITAL INVESTMENT IN BROADBAND INFRASTRUCTURE
BY GOVERNMENT AND TELCOS



The growth of demand for broadband services
is dependent on the capital investment in broadband infrastructure by governments and Telcos. A significant source of demand for
the Company's broadband services could be from homes and enterprises with access to high-speed broadband connections. The ability
of countries to invest in public broadband infrastructure to offer public accessibility is subject to countries' economic health.
The Company's prospects for business growth in Asia especially would be impacted by overall economic conditions in the territories
that we seek to expand into.



COMPETITION FROM BROADBAND CABLE AND TV
NETWORKS OPERATORS



The competition of services provided by
broadband cable network operators and TV networks. As traditional TV networks and cable TV operators provide alternate supply of
entertainment and on-demand broadband services, they are in competition with the Company, for market share. The Company, nevertheless,
will continue to leverage on its advantage of ownership rights to its own portfolio of media content and its ability to provide
broadband services over both the cable and wireless networks, at competitive rates.



5





The Company's business is reliant on complex
information technology systems and networks. Any significant system or network disruption could have a material adverse impact
on our operations and operating results. The Company's nature of business is highly dependent on the efficient and uninterrupted
operation of complex information technology systems networks, may they, either be that of ours, or our Telco/ ISP partners.



All information technology systems are
potentially vulnerable to damage or interruption from a variety of sources, including but not limited to computer viruses, security
breach, energy blackouts, natural disasters and terrorism, war and telecommunication failures.



System or network disruptions may arise
if new systems or upgrades are defective or are not installed properly. The Company has implemented various measures to manage
our risks related to system and network disruptions, but a system failure or security breach could negatively impact our operations
and financial results.



LAW AND REGULATIONS GOVERNING INTERNET



Increased regulation of the Internet or
differing application of existing laws might slow the growth of the use of the Internet and online services, which could decrease
demand for our services. The added complexity of the law may lead to higher compliance costs resulting in higher costs of doing
business.



UNAUTHORIZED USE OF PROPRIETARY RIGHTS



Our copyrights, patents, trademarks, including
our rights to certain domain names are very important to M2B's brand and success. While we make every effort to protect and stop
unauthorized use of our proprietary rights, it may still be possible for third parties to obtain and use the intellectual property
without authorization. The validity, enforceability and scope of protection of intellectual property in Internet-related industries
remain uncertain and still evolving. Litigation may be necessary in the future to enforce these intellectual property rights. This
will result in substantial costs and diversion of the Company's resources and could disrupt its business, as well as have a material
adverse effect on its business.



LAW AND REGULATIONS GOVERNING BUSINESS



As the Company continues to expand its business internationally
across different geographical locations there are risks inherent including:



1) Trade barriers and changes in trade regulations

2) Local labor laws and regulations

3) Currency exchange rate fluctuations

4) Political, social or economic unrest

5) Potential adverse tax regulation

6) Changes in governmental regulations



OUTBREAK OF N1H1 VIRUS FLU PANDEMIC OR SIMILAR PUBLIC HEALTH
DEVELOPMENTS



Any future outbreak of the N1H1 flu pandemic
or similar adverse public health developments may have a material adverse effect on the Company's business operations, financial
condition and results of operations.



6





ITEM 4: CONTROLS AND PROCEDURES



Evaluation of
Disclosure Controls and Procedures



A system of disclosure controls and procedures
(as defined in Rule 13a-15(e) and 15d-l5(e)) under the Securities Exchange Act of 1934,as amended [the "Exchange Act"])
are controls and other procedures that are designed to provide reasonable assurance that the information that the Company is required
to disclose in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported within
the time periods specified in the SEC's rules and forms, and that such information is accumulated and communicated to the Company's
management, including the Chief Executive Officer and Chief Financial Officer, as appropriate to allow timely decisions regarding
required disclosure. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including
the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even effective
disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives, and management
necessarily is required to use its judgment in evaluating the cost-benefit relationship of possible controls and procedures. In
addition, the design of any system of controls is based in part upon certain assumptions about the likelihood of future events,
and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Moreover, over time, controls may become inadequate because of changes in conditions, or the degree of compliance with policies
or procedures may deteriorate. Because of the inherent limitations in a control system, misstatements due to error or fraud may
occur and not be detected.



The Company's Chief Executive Officer and
Chief Financial Officer are responsible for establishing and maintaining disclosure controls and procedures for the Company, and
have concluded that our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act)
were not effective as of the end of the period covered by this report, based on their evaluation of these controls and procedures
required by paragraph (b) of Rules 13a-15(f) and 15d-15(f), due to certain material weaknesses in our internal control over financial
reporting as discussed below.



Internal Control Over Financial Reporting



The Company’s management is responsible
for establishing and maintaining adequate internal controls over financial reporting for the Company.  Due to limited
resources, Management conducted an evaluation of internal controls based on criteria established in Internal Control - Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”). The results of this
evaluation determined that our internal control over financial reporting was ineffective as of March 31, 2014, due to material
weaknesses.  A material weakness in internal control over financial reporting is defined as a deficiency, or a combination
of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement
of the Company's annual or interim financial statements will not be prevented or detected on a timely basis.  A significant
deficiency is a deficiency, or a combination of deficiencies, in internal control over financial reporting that is less severe
than a material weakness, yet important enough to merit attention by those responsible for oversight of our financial reporting.



Management’s assessment identified
the following material weaknesses in internal control over financial reporting:



| | · | The small size of our Company limits our ability to achieve the desired level of separation of internal controls and financial reporting.  We do not have a separate CEO and CFO, to review and oversee the financial policies and procedures of the Company, which does achieve a degree of separation.  Until such time as the Company is able to hire a separate CFO, we do not believe we meet the full requirement for separation.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | · | We do not have a functional audit committee since our Board of Directors acts as the audit committee.                                                                                                                                                                                                                                                                                                                                  
| | · | We have not achieved the desired level of documentation of our internal controls and procedures.  When the Company obtains sufficient funding, this documentation will be strengthened through utilizing a third party consulting firm to assist management with its internal control documentation and further help to limit the possibility of any lapse in controls occurring.                                                      
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                        



7





As a result of the material weaknesses
in internal control over financial reporting described above, the Company’s management has concluded that, as of March 31,
2014, the Company's internal control over financial reporting was not effective based on the criteria in Internal Control - Integrated
Framework issued by the COSO.



To date, the Company has not been able
to add any additional members to its Audit Committee due its limited financial resources. When the Company obtains sufficient funding,
Management intends to add additional members to the Audit Committee and charge them with assisting the Company in addressing
the material weaknesses noted above. The Company’s lack of current financial resources makes it impossible for the Company
to hire the appropriate personnel needed to overcome these weaknesses and ensure that appropriate controls and separation of responsibilities
of a larger organization exist.  We also will continue to follow the standards for the Public Company Accounting Oversight
Board (United States) for internal control over financial reporting to include procedures that:



| | o | Pertain to the maintenance of records in reasonable detail accurately that fairly reflect the transactions and dispositions of the Company's assets;                                                                                                                                                                          
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | o | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of the financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
| | o | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the Company's assets that could have a material effect on the financial statements.                                                                                                                 

Changes In InternalControl
Over Financial Reporting



Our management determined that there were
no changes made in our internal controls over financial reporting during the quarter ended March 31, 2014 that have materially
affected, or are reasonably likely to materially affect our internal control over financial reporting.



This annual report does not include an
attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting.  Management’s
report was not subject to attestation by the Company’s registered public accounting firm pursuant to rules of the Securities
and Exchange Commission that permit the Company to provide only management’s report in this annual report.





8





PART II: OTHER INFORMATION



ITEM 1: LEGAL PROCEEDINGS



None



ITEM 1A: RISK FACTORS



An investment in the Company's common stock
involves a high degree of risk. One should carefully consider the following risk factors in evaluating an investment in the Company's
common stock. If any of the following risks actually occurs, the Company's business, financial condition, results of operations
or cash flow could be materially and adversely affected. In such case, the trading price of the Company's common stock could decline,
and one could lose all or part of one's investment. One should also refer to the other information set forth in this report, including
the Company's consolidated financial statements and the related notes.



THE COMPANY CONTINUES TO USE SIGNIFICANT
AMOUNTS OF CASH FOR ITS BUSINESS OPERATIONS, WHICH COULD RESULT IN US HAVING INSUFFICIENT CASH TO FUND THE COMPANY'S OPERATIONS
AND EXPENSES UNDER OUR CURRENT BUSINESS PLAN.



The Company's liquidity and capital resources
remain limited. There can be no assurance that the Company's liquidity or capital resource position would allow us to continue
to pursue its current business strategy. The Company's quoted equity securities held as assets are dependent on the market value.
Any fluctuations or downturn in the securities market could adversely affect the value of these equity securities held. As a result,
without achieving growth in its business along the lines it has projected, it would have to alter its business plan or further
augment its cash flow position through cost reduction measures, sales of assets, additional financings or a combination of these
actions. One or more of these actions would likely substantially diminish the value of its common stock.



THE MARKET MAY NOT BROADLY ACCEPT THE COMPANY'S
BROADBAND WEBSITES AND SERVICES, WHICH WOULD PREVENT THE COMPANY FROM OPERATING PROFITABLY.



The Company must be able to achieve broad
market acceptance for its Broadband websites and services, at a price that provides an acceptable rate of return relative to the
Company-wide costs in order to operate profitably. There is no assurance that the market will develop sufficiently to enable the
Company to operate its Broadband business profitably. Furthermore, there is no assurance that any of the Company's services will
become generally accepted, nor is there any assurance that enough paying users and advertisers will ultimately be obtained to enable
us to operate these business profitably.



BROADBAND USERS MAY FAIL TO ADOPT THE COMPANY'S
BROADBAND SERVICES.



The Company's Broadband services are targeted
to the growing market of Broadband users worldwide to deliver content and E-commerce in an efficient, economical manner over the
Broadband networks. The challenge is to make the Company's business attractive to consumers, and ultimately, profitable. To do
so has required, and will require, the Company to invest significant amounts of cash and other resources. There is no assurance
that enough paying users and advertisers will ultimately be obtained to enable the Company to operate the business profitably.



9





FAILURE TO SIGNIFICANTLY INCREASE THE COMPANY'S
USERS AND ADVERTISERS MAY RESULT IN FAILURE TO ACHIEVE CRITICAL MASS AND REVENUE TO BUILD A SUCCESSFUL BUSINESS.



The Company incurs significant up-front
costs in connection with the acquisition of content, and bandwidth and network charges. The plan is to obtain recurring revenues
in the form of subscription and advertising fees to use the Broadband services, either paid by the users or advertisers.



There is no assurance as to whether the
Company will be able to maintain, or whether and how quickly the Company will be able to increase its user base, or whether the
Company will be able to generate recurring subscription and advertising fees to such a level that would enable this line of business
to continue to operate profitably. If the Company is not successful in these endeavors, the Company could be required to revise
its business model, exit or reduce the scale of the business, or raise additional capital.



COMPETITION IN THE BROADBAND BUSINESS IS
EXPECTED TO INCREASE, WHICH COULD CAUSE THE BUSINESS TO FAIL.



The Company's Broadband services are targeted
to the end user market. As the Broadband penetration rates increase globally, an increasing number of well-funded competitors have
entered the market. Companies that compete with the Company's business include telecommunications, cable, content management and
network delivery companies.



The Company may face increased competition
as these competitors partner with others or develop new Broadband websites and service offerings to expand the functionality that
they can offer to their customers. These competitors may, over time, develop new technologies and acquire content that are perceived
as being more secure, effective or cost efficient than the Company. These competitors could successfully garner a significant share
of the market, to the exclusion of the Company. Furthermore, increased competition could result in pricing pressures, reduced margins,
or the failure of the business to achieve or maintain market acceptance, any one of which could harm the business.



THE INABILITY TO SUCCESSFULLY EXECUTE TIMELY
DEVELOPMENT AND INTRODUCTION OF NEW AND RELATED SERVICES AND TO IMPLEMENT TECHNOLOGICAL CHANGES COULD HARM THE BUSINESS.



The evolving nature of the Broadband business
requires the Company to continually develop and introduce new and related services and to improve the performance, features, and
reliability of the existing services, particularly in response to competitive offerings.

The Company has under development new features
and services for its businesses. The Company may also introduce new services. The success of new or enhanced features and services
depends on several factors - primarily market acceptance. The Company may not succeed in developing and marketing new or enhanced
features and services that respond to competitive and technological developments and changing customer needs. This could harm the
business.



CAPACITY LIMITS ON THE COMPANY'S TECHNOLOGY
AND NETWORK HARDWARE AND SOFTWARE MAY BE DIFFICULT TO PROJECT, AND THE COMPANY MAY NOT BE ABLE TO EXPAND AND/OR UPGRADE ITS SYSTEMS
TO MEET INCREASED USE, WHICH WOULD RESULT IN REDUCED REVENUES.



While the Company has ample through-put
capacity to handle its customers' requirements for the medium term, at some point it may be required to materially expand and/or
upgrade its technology and network hardware and software. The Company may not be able to accurately project the rate of increase
in usage of its network. In addition, it may not be able to expand and/or upgrade its systems and network hardware and software
capabilities in a timely manner to accommodate increased traffic on its network. If the Company does not appropriately expand and/or
upgrade our systems and network hardware and software in a timely fashion, it may lose customers and revenues.



INTERRUPTIONS TO THE DATA CENTERS AND BROADBAND
NETWORKS COULD DISRUPT BUSINESS, AND NEGATIVELY IMPACT CUSTOMER DEMAND FOR THE COMPANY.



The Company's business depends on the uninterrupted
operation at the data centers and the broadband networks run by the various service providers. The data centers may suffer for
loss, damage, or interruption caused by fire, power loss, telecommunications failure, or other events beyond the Company. Any damage
or failure that causes interruptions in the Company's operations could materially harm business, financial conditions, and results
of operations.



In addition, the Company's services depend
on the efficient operation of the Internet connections between customers and the data centers. The Company depends on Internet
service providers efficiently operating these connections. These providers have experienced periodic operational problems or outages
in the past. Any of these problems or outages could adversely affect customer satisfaction and customers could be reluctant to
use our Internet related services.



10





THE COMPANY MAY NOT BE ABLE TO ACQUIRE
NEW CONTENT, OR MAY HAVE TO DEFEND ITS RIGHTS IN INTELLECTUAL PROPERTY OF THE CONTENT THAT IS USED FOR ITS SERVICES WHICH COULD
BE DISRUPTIVE AND EXPENSIVE TO ITS BUSINESS.



The Company may not be able to acquire
new content, or may have to defend its intellectual property rights or defend against claims that it is infringing the rights of
others, where its content rights are concerned. Intellectual property litigation and controversies are disruptive and expensive.
Infringement claims could require us to develop non-infringing services or enter onto royalty or licensing arrangements. Royalty
or licensing arrangements, if required, may not be obtainable on terms acceptable to the Company. The business could be significantly
harmed if the Company is not able to develop or license new content. Furthermore, it is possible that others may license substantially
equivalent content, thus enabling them to effectively compete against us.



THE COMPANY DEPENDS ON KEY PERSONNEL.



The Company depends on the performance
of its senior management team. Its success depends on its ability to attract, retain, and motivate these individuals. There are
no binding agreements with any of its employees that prevent them from leaving the Company at any time. There is competition for
these people. The loss of the services of any of the key employees or failure to attract, retain, and motivate key employees could
harm the business.



THE COMPANY RELIES ON THIRD PARTIES.



If critical services and products that
the Company sources from third parties, such as content and network services were to no longer be made available to the Company
or at a considerably higher price than it currently pays for them, and suitable alternatives could not be found, the business could
be harmed.



THE COMPANY COULD BE AFFECTED BY GOVERNMENT
REGULATION.



The list of countries to which our solutions
and services could not be exported could be revised in the future. Furthermore, some countries may in future impose restrictions
on streaming of broadband contents and related services. Failure to obtain the required governmental approvals would preclude the
sale or use of services in international markets and therefore, harm the Company's ability to grow sales through expansion into
international markets. While regulations in almost all countries in which our business currently operates generally permit the
broadband services, such regulations in future may not be as favorable and may impede our ability to develop business.



THE COMPANY COULD BE AFFECTED BY PIRACY
IN ASIA.



The Company is in the process of expanding
its services globally, and in particular is entering specific countries in Asia with customized country sites. These country sites
are designated to suit viewership patterns and styles in the countries they are launched in, and make use of the Company's content
and intellectual property rights to the content. The piracy of content is a significant problem in many Asian countries, and it
is not uncommon to see movies and television dramas appearing on illegal internet sites, and sold as pirated DVDs and VCDs. The
extent of this piracy of content in the specific countries that the Company is launching its sites will adversely affect to a certain
degree the amount of advertising and subscription revenues that the Company intends to earn.



THE COMPANY COULD BE AFFECTED BY ECONOMIC
DOWNTURNS



The global economy underwent a massive
downturn in 2009, which commenced in the second half of 2008. Many countries were faced with negative growth rates.. Where the
media industry was concerned, major corporations reduced their advertising expenditures or even cut back substantially all advertising
and promotional expenditures towards the latter half of 2008. The Company is heavily reliant on advertising and syndication revenues.
Any future downturns in any one country that the Company operates its WOWtv service would significantly affect the Company's revenues.



OUR COMMON STOCK IS CONSIDERED A "PENNY
STOCK". THE APPLICATION OF THE "PENNY STOCK" RULES TO OUR COMMON STOCK COULD LIMIT THE TRADING AND LIQUIDITY OF
THE COMMON STOCK, ADVERSELY AFFECT THE MARKET PRICE OF OUR COMMON STOCK AND INCREASE THE TRANSACTION COSTS TO SELL THOSE SHARES.



Our common stock is a "low-priced"
security or "penny stock" under rules promulgated under the Securities Exchange Act of 1934, as amended. In accordance
with these rules, broker-dealers participating in transactions in low-priced securities must first deliver a risk disclosure document
which describes the risks associated with such stocks, the broker-dealer's duties in selling the stock, the customer's rights and
remedies and certain market and other information. Furthermore, the broker-dealer must make a suitability determination approving
the customer for low-priced stock transactions based on the customer's financial situation, investment experience and objectives.
Broker-dealers must also disclose these restrictions in writing to the customer, obtain specific written consent from the customer,
and provide monthly account statements to the customer. The effect of these restrictions will likely decrease the willingness of
broker-dealers to make a market in our common stock, will decrease liquidity of our common stock and will increase transaction
costs for sales and purchases of our common stock as compared to other securities.



11





THE STOCK MARKET IN GENERAL HAS EXPERIENCED
VOLATILITY THAT OFTEN HAS BEEN UNRELATED TO THE OPERATING PERFORMANCE OF LISTED COMPANIES. THESE BROAD FLUCTUATIONS MAY BE THE
RESULT OF UNSCRUPULOUS PRACTICES THAT MAY ADVERSELY AFFECT THE PRICE OF OUR STOCK, REGARDLESS OF OUR OPERATING PERFORMANCE.



Shareholders should be aware that, according
to SEC Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include (1) control of the market for the security by one or a few broker-dealers that are often related
to the promoter or issuer; (2) manipulation of prices through prearranged matching of purchases and sales and false and misleading
press releases; (3) boiler room practices involving high-pressure sales tactics and unrealistic price projections by inexperienced
sales persons; (4) excessive and undisclosed bid-ask differential and markups by selling broker-dealers; and (5) the wholesale
dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with
the resulting inevitable collapse of those prices and with consequent investor losses. The occurrence of these patterns or practices
could increase the volatility of our share price.



WE DO NOT EXPECT TO PAY DIVIDENDS FOR THE
FORESEEABLE FUTURE, AND WE MAY NEVER PAY DIVIDENDS. INVESTORS SEEKING CASH DIVIDENDS SHOULD NOT PURCHASE OUR COMMON STOCK.



We currently intend to retain any future
earnings to support the development of our business and do not anticipate paying cash dividends in the foreseeable future. Our
payment of any future dividends will be at the discretion of our Board of Directors after taking into account various factors,
including but not limited to our financial condition, operating results, cash needs, growth plans and the terms of any credit agreements
that we may be a party to at the time. In addition, our ability to pay dividends on our common stock may be limited by Nevada state
law. Accordingly, investors must rely on sales of their common stock after price appreciation, which may never occur, as the only
way to realize a return on their investment. Investors seeking cash dividends should not purchase our common stock.



FUTURE SALES OF OUR COMMON STOCK COULD
PUT DOWNWARD SELLING PRESSURE ON OUR COMMON STOCK, AND ADVERSELY AFFECT THE PER SHARE PRICE. THERE IS A RISK THAT THIS DOWNWARD
PRESSURE MAY MAKE IT IMPOSSIBLE FOR AN INVESTOR TO SELL SHARES OF COMMON STOCK AT ANY REASONABLE PRICE, IF AT ALL.



Future sales of substantial amounts of
our common stock in the public market or the perception that such sales could occur, could put downward selling pressure on our
common stock and adversely affect its market price.



THE OVER THE COUNTER BULLETIN BOARD IS
A QUOTATION SYSTEM, NOT AN ISSUER LISTING SERVICE, MARKET OR EXCHANGE. THEREFORE, BUYING AND SELLING STOCK ON THE OTC BULLETIN
BOARD IS NOT AS EFFICIENT AS BUYING AND SELLING STOCK THROUGH AN EXCHANGE. AS A RESULT, IT MAY BE DIFFICULT FOR YOU TO SELL YOUR
COMMON STOCK OR YOU MAY NOT BE ABLE TO SELL YOUR COMMON STOCK FOR AN OPTIMUM TRADING PRICE.



The Over the Counter Bulletin Board (the
"OTC BB") is a regulated quotation service that displays real-time quotes, last sale prices and volume limitations in
over-the-counter securities. Because trades and quotations on the OTC Bulletin Board involve a manual process, the market information
for such securities cannot be guaranteed. In addition, quote information, or even firm quotes, may not be available. The manual
execution process may delay order processing and intervening price fluctuations may result in the failure of a limit order to execute
or the execution of a market order at a significantly different price. Execution of trades, execution reporting and the delivery
of legal trade confirmations may be delayed significantly. Consequently, one may not be able to sell shares of our common stock
at the optimum trading prices.



When fewer shares of a security are being
traded on the OTC Bulletin Board, volatility of prices may increase and price movement may outpace the ability to deliver accurate
quote information. Lower trading volumes in a security may result in a lower likelihood of an individual's orders being executed,
and current prices may differ significantly from the price one was quoted by the OTC Bulletin Board at the time of the order entry.
Orders for OTC Bulletin Board securities may be canceled or edited like orders for other securities. All requests to change or
cancel an order must be submitted to, received and processed by the OTC Bulletin Board. Due to the manual order processing involved
in handling OTC Bulletin Board trades, order processing and reporting may be delayed, and an individual may not be able to cancel
or edit his order. Consequently, one may not be able to sell shares of common stock at the optimum trading prices.



The dealer's spread (the difference between
the bid and ask prices) may be large and may result in substantial losses to the seller of securities on the OTC Bulletin Board
if the common stock or other security must be sold immediately. Further, purchasers of securities may incur an immediate "paper"
loss due to the price spread. Moreover, dealers trading on the OTC Bulletin Board may not have a bid price for securities bought
and sold through the OTC Bulletin Board. Due to the foregoing, demand for securities that are traded through the OTC Bulletin Board
may be decreased or eliminated.



12





WE GENERATED A NET LOSS OF $213,828 AND
$406,915 BEFORE TAXES FOR THE THREE MONTHS ENDED MARCH 31, 2014 AND MARCH 31, 2013, RESPECTIVELY. WE MAY BE UNABLE TO CONTINUE
AS A GOING CONCERN.



Our consolidated financial statements have
been prepared on a going concern basis which assumes that we will be able to realize our assets and discharge our liabilities in
the normal course of business for the foreseeable future. We generated a consolidated net loss before taxes of $213,828 for the
three months ended March 31, 2014 compared to a consolidated net loss before taxes of $406,915 during 2012. We realized a deficit
cash flow from operating activities of $255,346 for the three months ended March 31, 2014 compared to gain of $186,590 for the
three months ended March 31, 2013. For the three months ended 31 March 2014, we had an accumulated deficit of $42,937,306 and a
working capital deficiency of $3,020,671 compared to an accumulated deficit of $42,759,864 and a working capital deficiency of
$3,107,722 for the year ended December 31, 2013. At at March 31, 2014, we had a stockholders' deficit of $3,018,612 compared to
a stockholders' deficit of $3,104,784 as at December 31, 2013. Our ability to continue as a going-concern is in substantial doubt
as it is dependent on a number of factors including, but not limited to, the receipt of continued financial support from our investors,
our ability to raise equity or debt financing as we need it, and whether we will be able to use our securities to meet certain
of our liabilities as they become payable. The outcome of these matters is dependent on factors outside of our control and cannot
be predicted at this time.



ITEM
2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS



During the quarter ended March 31, 2014, the
Company received a total of $364,000 for the sale of 3,640,000 shares of Series B Convertible Preferred Stock (“Preferred
Stock”) through its private placement of shares of Preferred Stock at a purchase price of $0.10 per share to “accredited
investors,” as that term is defined in Regulation D of the Securities Act of 1933. Each share of Series B Convertible Preferred
Stock is convertible into ten (10) shares of common stock. The total proceeds were used for the working capital of the Company. The
shares of the Company's preferred stock in above private placement were issued and sold in reliance upon the exemption provided
by Section 4(2) and/or Regulation D/Regulation S of the Securities Act of 1933. Appropriate investment representations were obtained
and the securities were issued with restrictive legends.



On April 17, 2014, the Company issued a total
of 1,000,000 shares of Series B Convertible Preferred Stock ("Preferred Stock") through its private placement of shares
of Preferred Stock at a purchase price of $0.10 per share for a total amount of $100,000, to "accredited investors",
as that term is defined in Regulation D of the Securities Act of 1933. Each share of Series B Convertible Preferred Stock is convertible
into ten (10) shares of common stock. The proceeds of the private placement were used for working capital. The shares of the Company's
preferred stock in above private placement were issued and sold in reliance upon the exemption provided by Section 4(2) and/or
Regulation D/Regulation S of the Securities Act of 1933. Appropriate investment representations were obtained and the securities
were issued with restrictive legends.





ITEM 3: DEFAULTS UPON SENIOR SECURITIES



None



ITEM 4: MINE SAFETY DISCLOSURES



None



ITEM 5: OTHER INFORMATION



None



13





ITEM 6: EXHIBITS:



|Exhibit 31.1 | CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
|------------ | ------------------------------------------------------------------------------------------
|             |                                                                                           
|Exhibit 31.2 | CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT
|             |                                                                                           
|Exhibit 32.1 | CERTIFICATION OF CHIEF EXECUTIVE OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
|             |                                                                                           
|Exhibit 32.2 | CERTIFICATION OF CHIEF FINANCIAL OFFICER PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT
|             |                                                                                           
|Exhibit 99.1 | Temporary Hardship Exemption                                                              



|101.INS* | XBRL Instance Document                                
|-------- | ------------------------------------------------------
|         |                                                       
|101.SCH* | XBRL Taxonomy Extension Schema Document               
|         |                                                       
|101.CAL* | XBRL Taxonomy Extension Calculation Linkbase Document 
|         |                                                       
|101.DEF* | XBRL Taxonomy Extension Definition Linkbase Document  
|         |                                                       
|101.LAB* | XBRL Taxonomy Extension Labels Linkbase Document      
|         |                                                       
|101.PRE* | XBRL Taxonomy Extension Presentation Linkbase Document





| | * | To be furnished by amendment per Temporary Hardship Exemption under Regulation S-T.
| | - | -----------------------------------------------------------------------------------







14







SIGNATURES



Pursuant to the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.





|             | Amaru, Inc.
        (Registrant) |                                                               
|------------ | -------------------------------- | --------------------------------------------------------------
|             |                                  |                                                               
|May 15, 2014 | By:                              | /s/ Chua Leong Hin                                            
|             |                                  | President, Chief Executive Officer and Chief Financial Officer







15